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Experts say rail plan improved, but still flawed

California High-Speed Rail Authority

An independent panel of transportation and finance experts says the latest business plan for California’s proposed high-speed train system is a big improvement from last fall, but still gives cause for concern.

Uncertainty over money to finish the 520-mile system between San Francisco and Los Angeles after initial construction and lingering doubts over what it will cost to operate the train line are among warnings to legislators by the High-Speed Rail Peer Review Group.

If the project falters after building a $6 billion section from Madera to Bakersfield – where construction could start this year or early next year – California would have a partial system of limited use, wrote Will Kempton, the panel’s chairman and CEO of the Orange County Transportation Authority.

“It would be a poor use of resources and an embarrassment,” he added, “but not a financial disaster.”

The panel’s sharpest criticism was aimed at the authority’s ability to oversee such a big project.

“We continue to believe that management resources are inadequate to supervise the enormous contracting effort,” said Kempton, who is also a former state director of the California Department of Transportation, “and that attempts to launch a massive construction program in response to federal completion deadlines will only make the problem worse.

“We believe the project should not proceed until a plan for resolving this challenge is prepared” and accepted by the rail authority and Gov. Jerry Brown.

The review group was established by Proposition 1A, a $9 billion high-speed rail bond measure approved by voters in 2008. It is to evaluate the California High-Speed Rail Authority’s business and financing plans and offer recommendations to the Legislature.

The authority’s board chairman, Dan Richard, said Thursday that the agency takes the review panel’s recommendations seriously and is working to address the management concerns.

Last week, the authority’s board voted to offer its vacant CEO position to Jeffrey Morales, a former Caltrans director who now works as an executive with the authority’s biggest contracting consultant.

In a response letter to legislative leaders, Richard said the authority has hired 23 new staff members over the past 11 months.

The agency also expects to fill its vacant chief finance officer and chief risk officer posts this month.

Richard added that Morales, whose contract is expected to be formally approved by the authority board this week, will fill other senior positions “as quickly as possible.”

The April version of the business plan calls for building a “blended” train system that includes dedicated high-speed tracks through the San Joaquin Valley while sharing tracks with existing but upgraded commuter train lines in the Bay Area and Los Angeles Basin. It estimates the cost of construction over the next 16 years at $68.4 billion – about $30 billion less than building high-speed-only tracks for the entire length of the system, as proposed in a November draft of the business plan.

The plan calls for construction to begin late this year or early next year on a 120-mile stretch between Madera and Bakersfield using $2.7 billion in Prop. 1A money and $3.3 billion in federal transportation and stimulus funds pledged by the Obama administration. That would become part of an initial operating system of electric trains that could carry passengers between Merced and the Los Angeles Basin by 2022.

The plan includes an expectation that the federal government would provide most of the money needed to extend construction north past Madera and south from Bakersfield over the next decade. As a backstop, however, rail officials and the Brown administration said California’s new carbon cap-and-trade program – which will sell pollution credits to industries in the state through auctions – can plug any funding gap.

The Kempton panel said the changes between November and April made the plan better “in a number of significant ways.” By making earlier investments in the Bay Area and Southern California, the review group said “services currently carrying the most passengers will be improved at the outset.”

The group remains skeptical, however, over the plan’s long-range reliance on the federal government. The Republican-controlled House of Representatives has pledged to block any future money for high-speed rail, and winning any long-term federal commitment “will clearly be a challenge in today’s constrained economic climate,” Kempton wrote.

The panel is also wary about whether the new cap-and-trade program can generate enough money to plug the funding gap if the federal government fails to come through.

The review group said completion of the Madera-to-Bakersfield stretch could be used to increase the speed of Amtrak’s existing San Joaquin passenger trains through the Valley. It would “provide valuable design and construction experience … that would form the basis for future cost estimates” on later portions of the system.

But an abridged system that falls short of reaching either the Bay Area or Los Angeles would leave California on the hook for repaying $2.7 billion in Prop. 1A bonds “on a segment that … could clearly carry fewer passengers than originally planned.”

The panel also warned that “work could become so snarled in litigation or cost overruns that it would never be completed.” The rail authority already faces a lawsuit over its proposed route through Kings County. On Friday, the Madera and Merced county farm bureaus joined other opponents in filing a lawsuit against the agency in Sacramento over its recent environmental certification of the Merced-to-Fresno section.

Richard didn’t address the review group’s funding concerns in his response, but acknowledged that the rail authority “is committed to working constructively with (the peer review group) and others to continue to refine and improve our work.”

It remains to be seen how state legislators will respond to the review group’s report and Richard’s response. Assembly members and senators continue to wrangle over the state’s 2012-13 budget, in which Brown has requested the $2.7 billion California must put up to receive the $3.3 billion from the federal government for initial construction in the Valley.

Staffers for several Valley legislators, including Assemblymen David Valadao, R-Hanford, and Henry T. Perea, D-Fresno, said Thursday that their bosses were unaware of the peer group’s report before The Bee sought their comments.

Republicans in both the Assembly and Senate have typically opposed the high-speed rail plan. And key Democrats, including Sens. Alan Lowenthal of Long Beach, who leads the Senate’s select committee on high-speed rail, and Joe Simitian of Palo Alto, a member of the budget and transportation committees, have repeatedly expressed frustration with the authority’s leadership, concern over the program’s cost, and skepticism over the agency’s ridership and revenue estimates.

The reporter can be reached at 559-441-6319, tsheehan@fresnobee.com or @tsheehan on Twitter. This story resulted from a partnership among California news organizations following the state's high-speed rail program, including The Fresno Bee, The Sacramento Bee, California Watch, The Bakersfield Californian, The Orange County Register, the San Francisco Chronicle, The (Riverside) Press-Enterprise, U-T San Diego, KQED, the Merced Sun-Star, The Tribune of San Luis Obispo and The Modesto Bee.


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